The role of value-based care in patient access

With rising healthcare costs around the world, value-based care (VBC) is a paradigm shift poised to make healthcare more accessible and affordable. It’s a departure from the traditional fee-for-service (FFS) model, which pays providers each time they perform a service. In this type of care model, providers are rewarded for the volume of care they provide, rather than the quality.  

Value-based care shifts the priority of healthcare to patient wellbeing and patient centeredness. Value-based care agreements incentivize healthcare stakeholders to achieve better outcomes, and may even penalize excessive spending or unnecessary procedures.  

There are many approaches to providing and paying for value-based care, and they will be the subject of this article. Let’s take a broad look at what VBC is, its benefits, its challenges, and future directions.  

Why value-based care is needed

Healthcare costs are rising across the globe, and patients are bearing the brunt of it, with out-of-pocket healthcare costs rising faster than costs to insurers. Drugs are also becoming more expensive, and insurers and employers are concerned about high-cost claims. Many insurers are refusing to cover expensive treatments, like cell and gene therapies, or GLP-1 agonists.  

Although the fee-for-service model is still important, value-based care can fill the gaps to bring medicines to patients faster. Using cell and gene therapies as an example, VBC could prevent patients like Forrest VanPatten from dying during the process of jumping from insurer to insurer, hoping to find one that will cover the treatment.  

Alternative payment models (ABMs), a core element in the delivery of VBC, help these therapies get to market faster, by lowering the financial burden of expensive therapies. This could include installment payments, among several types of value-based contracts.  

Although pharmaceutical companies continue to improve patient outcomes by developing more effective medicines, healthcare costs include more than the price of the drugs. The total cost of care must also be managed and requires a close evaluation of how care is delivered to the patient.  

Ultimately, value-based care is a strategy to deliver a better healthcare experience to the patient while utilizing resources more effectively. It is feasible to reward healthcare practitioners for improving patient health, whether it be keeping them out of the hospital, reducing their reliance on medication, or becoming completely disease-free. But there are many challenges in implementing these models, as we’ll discuss.

The types of value-based care

There are many forms of value-based care, and different terms are used interchangeably. Use the glossary table below while reading this article to better understand.  

VBC can involve the following:  

• Programs that work on delivering care more effectively

• Payment models that involve sharing risk between the payer and the manufacturer  

• Population-based payments to provider organizations

• Patient-centered care: focusing on the needs and wants of the patient

• Restricting access to medications only for those for whom it would be more effective

There are many ways medicine and care can be delivered to people in ways that support better outcomes. Let’s summarize the models above.  

Effective care delivery

The accountable care organization (ACO) is a group of clinical entities and providers that in synchronization, aim to deliver efficient and cost-effective healthcare to patients. If the efforts are successful, saved costs can be distributed, providing an incentive to avoid unnecessary procedures. A key component of ACOs is that financial responsibility lies on caregivers. ACOs were a central component of the Affordable Care Act in the United States, and generally describe the American healthcare system. However in several European countries, similar models providing integrative care do exist.  

This type of integrated care model may still rely on the fee-for-service model, but aim to reduce the volume of care.  

Risk-sharing agreements

Several value-based drug pricing agreements foster risk-sharing between the manufacturer of the drug and the payer. The following are examples:  

• Pay-for-performance (P4P)

• Coverage with evidence development (CED)

• Outcomes guarantees

• Installment payments

• Managed entry agreements

Many of the above terms overlap with each other. What they have in common is that they can address clinical uncertainty—payers may be reluctant to reimburse therapies with limited clinical evidence from the pivotal trial. However, to ensure patient access, risk-sharing agreements are way to allow patients to be treated for a steep discount, while gathering real-world evidence.  

In a pay-for-performance agreement, payers will only have to pay for the treatment if anticipated patient outcomes are achieved. Several hybrid iterations of this type of agreement exist, including milestone payments, where payers receive rebates if disease progresses.  

You can find specific examples of these kinds of agreements in our Agreements Library.  

Population-based payments

Population-based payments facilitate integrative care delivery. They involve payments for either a specific condition, or for the care of an entire patient. However, unlike an ACO, population-based payments are value-based and are not based on the fee-for-service model.  

The Health Care Payment Learning & Action Network (HCP LAN) defines population-based payments as a “single payment that encompasses a broad array of services.” This is also more widely referred to as capitation. Capitation can apply to the care for a specific condition, or the entire continuum of care.  

NHS England defines capitation as “paying a provider or group of providers to cover the majority (or all) of the care provided to a specified population across different care settings. The regular payments are calculated as a lump sum per patient.”

Capitated payments typically involve a per-member-per-month fee. They provide predictable revenue for hospitals and providers while incentivizing them to provide quality care.  

Restricted access

Another way to address clinical uncertainty is to limit who can receive treatment as real-world evidence is being gathered. By refining the eligibility criteria, patients most-likely to benefit from the treatment can receive access.

What are some of the challenges of implementing value-based care?

There are several challenges to implementing value-based care. They include:  

• Limiting who may receive care

• Managing revenues

• Integrating healthcare services  

• Measuring clinical outcomes

One challenge with VBC is deciding on patient eligibility. Insurers may choose to cover a very select group of patients, denying others who may need treatment coverage, to ensure that they are incentivized accordingly. This leads to another challenge: choosing the right outcomes to measure. In the fee-for-service model, billing is tied to the condition and medication being prescribed, whereas in a value-based contract, financial incentives are tied to outcomes measured by a healthcare provider.

The chosen outcomes must be evidence-based and tracked accordingly. Collecting data, sharing it with various stakeholders, and integrating it into a patient’s care is another challenge. Great structural changes are needed to ensure the compliant sharing of this type of data.  

For manufacturers and hospitals alike, another challenge is to manage revenues. Pharmaceutical companies may be unclear for example on how drug profitability could vary with a performance-based or utilization cap contract. One of our solutions to this largely manual process was to create a drug price simulator. This tool helps manufacturers of health technologies compare and contrast different value-based contracts during the negotiation process.

For hospitals, it’s imperative to correctly track rebates, especially if they are warranted after upfront payments: our rebate management platform helps hospital systems identify up to 30% more rebates.  

Value-based care can balance innovation while lowering healthcare costs, but implementing it involves enhanced coordination of care delivery and significant organizational changes. VBC also involves innovative payment models that share risk with healthcare providers or place the burden of risk on them entirely to incentivize quality care.

Value-based payment models can reduce high upfront costs of expensive therapies while further evidence is gathered to justify the high costs. For providers, VBC may reduce burnout risk by incentivizing them to keep patients healthy.

The integration of value-based care in healthcare systems around the world requires data. At Lyfegen, we help pharma, MedTech, and providers understand the impact of value-based payment models with our innovative software. Let’s make this shift happen together.

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